Things getting worse at Sears as Q3 loss widens on sliding sales

Sears Holdings Corp.’s woes mounted in the third quarter, as the struggling retailer reported its 20th consecutive quarterly loss and another drop in same-store sales.



Although Sears CEO Eddie Lampert said Sears is “fully committed to restoring profitability,” the retailer’s disastrous quarterly performance caused some industry experts to say Sears’ demise is now a matter of when, not if.



“In the near term, we expect Sears to stumble along and make further disposals to fund the business,” said Neil Saunders, CEO of retail consulting firm Conlumino. “We also expect more store closures, not least because both Sears and Kmart have a bulk of leases expiring over the next five years. It is hard to put an exact timescale on Sears’ demise. However, in our view, it is now firmly on a trajectory to failure.” (For more commentary, click here.)



Sears continues to maintain that it is the middle of a transformation to a membership-based retailer, reliant on a smaller base of stores and its Shop Your Way loyalty program.



"We remain fully committed to restoring profitability to our company, are taking actions such as reducing unprofitable stores, reducing space in stores we continue to operate (including through the Seritage lease arrangement), reducing investments in underperforming categories and improving gross margin performance and managing expenses relative to sales in key categories,” Lampert stated.



For its fiscal third quarter, Sears reported a loss of $748 million, or $6.99 a share, compared with a loss of $454 million, or $4.26 a share, in the year-ago period. On an adjusted basis, the company posted a loss of $3.11 a share. Analysts had expected a loss of $4.06 a share on $4.95 billion in revenue.



Revenue fell to $5.0 billion from $5.8 billion last year, with the loss impacted by a decrease in stores in operation.



Same-store sales dropped 7.4%, with a 10% decrease at Sears stores and a 4.4% decrease at Kmart stores.



The company’s gross margin fell to 19.1% from 21.9% in the year-ago period.



The company said it would continue to cut costs by seeking alternatives for its real estate portfolio, the Sears Home Services business and the unit housing Kenmore appliance, Craftsman tools and DieHard vehicle battery brands.



“We will continue to take actions to generate liquidity, adjust our overall capital structure, and manage our business while meeting all of our financial obligations,” said Sears CFO Jason M. Hollar. “Actions may include additional expense reductions, financing transactions and asset monetization including exploring alternatives for our Kenmore, Craftsman and DieHard brands, our Sears Home Services business and our real estate portfolio.”